Industry Insights | Opportunities and Challenges Coexist, with the Chinese Packaging and Beverages Market Expanding Steadily

According to the research data of Frost & Sullivan, the overall packaged beverage market had a compound annual growth rate exceeding 5% over the three years from 2016 to 2019. During the subsequent pandemic, the overall industry still maintained a stable compound annual growth rate over three years, achieving a steady expansion of the entire industry.

The packaged beverage industry mainly includes categories such as carbonated drinks, functional beverages, tea beverages, fruit juice drinks, protein beverages, packaged drinking water, solid beverages, plant-based beverages, and flavored beverages. In recent years, in addition to traditional products like carbonated drinks, tea beverages, and fruit juice drinks, new beverage products have continuously emerged, such as cheese milk tea, sparkling water, plant-based protein beverages, sports drinks, etc. As consumers' demand for healthy diets and functional beverages continues to grow, new beverage products have received more attention in the market.

From the perspective of overall industry channel distribution, more than one-third are traditional channels, followed by modern channels, including e-commerce and catering channels, which also account for a certain proportion. For some packaged beverage brands, selling their products through their own channels and agents is an important way to expand their sales network across the country and gain a larger market share.

In the minds of consumers, the brand influence of packaged beverages is very important. In the Chinese market, well-known brands such as Coca-Cola and Pepsi-Cola have a very high brand awareness. At the same time, a series of local Chinese brands such as Huiyuan and China Resources Yibao also occupy an important position in the market. In addition, international brands such as Nestle and Danone also hold a certain market share in the Chinese market. These international brands further expand their market share in China by cooperating with local Chinese brands.

Overall, the packaging beverage market in China is complex and competitive. Differentiation between brands and products, innovation in marketing and channels, and improvement in quality and taste are all key factors for brands to compete for market share. At the same time, consumers' attention to issues such as health, nutrition, and environmental protection will also play an increasingly important role in future market competition.

The interest e-commerce and packaged beverage industries in China have both been rapidly developing fields in recent years, with a close connection and interaction between them. Interest e-commerce refers to e-commerce platforms that are user-interest-oriented and provide personalized products and services. Currently, there are more than 500 interest e-commerce platforms in China, covering multiple fields such as beauty, sports, gaming, culture, etc. The development of the interest e-commerce industry benefits from the rapid popularization of the internet in China and the rise of mobile internet. Especially with the popularization of 5G technology, people's demand for personalized products and services is increasing. At the same time, the continuous upgrading of internet platforms and technologies also provides strong support for the development of interest e-commerce.

Compared with traditional e-commerce, interest-based e-commerce platforms also have the following advantages:

1) Personalized products and services:The platform can provide users with more personalized products and services based on their interests, hobbies, and behavioral data, meeting their needs.

2) Socialization:The platform can enable social interaction among users through various means, thereby increasing user stickiness and loyalty.

3) Rich variety:Interest-based e-commerce platforms can span multiple fields, offering a variety of products and services to meet users' diverse needs.

Interest-based e-commerce is an innovative channel in the beverage packaging industry. With the rise of interest-based e-commerce, sales channels for packaged beverages will become more diversified, market competition will become fiercer, and traditional physical stores and traditional e-commerce platforms will face new competitive pressure from interest-based e-commerce.

On the other hand, interest-based e-commerce provides a more convenient, fast, and affordable shopping method, which will change consumers' purchasing habits. It is expected that more consumers will choose to purchase packaged beverages on interest-based e-commerce platforms. Taking Douyin E-commerce as an example, the overall scale of the food and beverage industry on Douyin E-commerce was about 102 billion yuan in 2022, with an annual compound growth rate exceeding 264% from 2018 to 2022. In 2022, overall live streaming sales increased by more than 129%, with food and beverage industry merchants exceeding 130% growing in sales. Among them, the annual year-on-year growth rate of food and beverage consumption generated through live streaming in 2022 was about 105.3%, with an average monthly live streaming product click-through rate of about 3 billion times.

Meanwhile, interest-based e-commerce platforms offer more flexible brand marketing methods, allowing brands to interact directly with consumers through social media, promotional activities, etc., thereby enhancing brand awareness and loyalty. In terms of products themselves, consumers' demand changes and feedback on interest-based e-commerce platforms are more timely, which also enables packaging beverage manufacturers to understand market demand more quickly, accelerate product innovation and upgrading, and improve competitiveness.

In recent years, with the increasing health awareness of people, there has also been a trend in the packaged beverage industry known as 'light wellness'. The most obvious manifestation is the rise in low-sugar, low-calorie beverages, and the increase in functional beverages also corroborates this trend from the side. In addition to traditional beverages, more and more beverage companies are starting to introduce beverages with certain functions, such as enhancing immunity and improving digestion, to meet consumers' pursuit of health.

With the rapid development of the economy and the acceleration of life pace, young people generally face greater pressure. At the same time, the gradual deepening of health awareness and the impact of the three-year pandemic have also increased young people's awareness of paying attention to their own physical health. However, young people seem to pursue 'punk health preservation,' which means indulging in unhealthy lifestyles while trying to maintain health. 'Staying up the longest hours and consuming the most health supplements' has gradually become a true portrayal of many contemporary young people. These two seemingly contradictory demands actually reflect the most genuine needs of contemporary young people.

Two years ago, "boiling goji berries in a thermos cup" was the most popular punky health trend among young people. Now, they have even omitted this step and started drinking "goji berry puree" directly. The health practices favored by young people are becoming increasingly convenient and light: such as donkey-hide gelatin yogurt, instant bird's nest, ginseng jelly, Polygonum multiflorum and black sesame seeds, enzyme soft candies, etc. In the fast-paced modern life, "light nourishment" and "light health preservation" have become an irresistible consumer trend. Traditional nourishing products are also undergoing a major revolution in product form, such as donkey-hide gelatin turning into powder and goji berries leaving the thermos cup behind.

"Pocket Health" is a new form that includes instant powders, freshly stewed foods, indulgent snacks, and brewed beverages. Many time-honored brands have also started some cross-border ventures to meet the demand for brand rejuvenation. For example, brands like Fudonghai and Guben Tang have made wolfberries from Ningxia's native region into independent small-packaged "wolfberry puree"; time-honored brands such as Fanghuichun Tang and Huqingyu Tang have launched tin foil or small bagged black sesame balls, targeting office white-collar workers and young people who are "early balding."

In terms of quality and taste, consumers are paying more and more attention to the quality, flavor, and taste of beverages. Therefore, packaging beverage companies not only need to focus on the design of their product's outer packaging but also need to grasp the taste and quality of their products to meet consumer needs. For dairy products, as the homogenization of products in the dairy industry becomes more severe, many dairy companies have begun to explore new market opportunities by segmenting their product categories, thereby forming differentiated competition and further gaining a larger market share. Common practices include classifying products based on subsequent processing techniques, such as ultrafiltration milk; or creating differentiation through cow breeds, such as Juanshan milk and water buffalo milk; there are even those that start from the source, such as cell milk, etc. The continuous upgrading of products has further promoted the development of the entire industry.

In terms of packaging, in order to reduce environmental impact and pursue green environmental protection, beverage companies have begun to adopt various green packaging materials, such as biodegradable paper packaging and recyclable glass bottles, to reduce the use of plastic packaging. In addition, we have observed that the trend towards larger packaging in the overall food and beverage industry is more pronounced than last year. Groups such as Nongfu Spring, Wahaha, and Huiyuan have successively launched larger-sized packages of their original products for sale.

Overall, China's packaged beverage market is huge and competitive. Packaging beverage companies need to pay attention not only to product quality and taste but also to marketing methods, channel innovation, health, and environmental protection. They must continuously improve product quality, accelerate product innovation, meet consumer needs, and enhance their market competitiveness.